TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker and becoming a Supporting Member. For more info: Support TMC

New Mexico developer suing Tesla over lost electric car factory

"Remember back in 2008 when Tesla decided to move the production of its Model S electric car from New Mexico to California? Well, so does the developer that was going to build the facility — they’re suing Tesla for breach of contract and fraud."

If Rio Real Estate Investment Opportunities had a case, I don't see why they waited until now to sue. Perhaps they figure now Tesla has deeper pockets. They claim they signed a deal back in 2007. That was clearly way premature for Tesla to move forward on the then Whitestar. Plans for a plant in San Jose were scraped when the details of the ATVM loan program required using a brownfield sight. Such requirements would have similarly scuttled plans for the location this New Mexico developer had scouted.

It's weird to bring the case so long after the alleged breach, but as long as the breach of contract statute of limitations is five years, they should be fine. I assume that the timing is intended to pressure Tesla to settle so as to avoid negative publicity as their cars start rolling out.

Tesla smartly removed the case to federal court. Just based on reading the Complaint and Answer, I think Tesla has a good defense to this case. The "contract" they signed is really just an agreement to enter into a contract/lease. These are pretty hard to enforce. To the extent that the developer spent hard money in anticipation of Tesla signing a lease, they may be entitled to recovery of that under the concept of promissory estoppel, but otherwise I don't see any big exposure for Tesla. They can settle cheap, but I assume the developer is counting on home court advantage to pressure Tesla to pay more than the case is worth.